HSBC lifts average gold price forecast for 2015 by 5%

HSBC has raised its average gold price forecast for 2015 in its latest research note. The bank notes that strength in dollar and mounting geopolitical concerns will brighten gold’s safe-haven appeal, which in turn may get reflected in prices. Incidentally, dollar is currently trading at nine-year highs against the Euro.

According to the report, the yellow metal is likely to average $1,234 per Oz in 2015, significantly higher by 5% when compared with the earlier forecast of $1,175 per Oz. Gold is expected to trade in the range between $1,120-1,305 during this year. The bank kept the 2016 average price unchanged at $1,275 per Oz. Furthermore, gold is likely to average at $1,275 per Oz during 2017 as well.

The supply of gold is expected to remain tight during the year, HSBC notes. The average production cost of gold still continues to remain well under current market price. Prices below $1,200 per Oz may force higher-cost producers to refrain from long term production. Any drop below $1,100 per Oz maylead to temporary shutdowns or production slowdowns at high-cost mines.

On the other hand, the demand for gold is likely to improve during latter half of 2015. Bulk of physical demand revival will come from emerging markets. The nature of physical demand in these countries is likely to set the floor and ceiling for gold prices. Significant price drops may spur jewellery, coin and gold bar purchases in low income nations. Conversely, rallies may limit gold purchases, thereby capping the prices.

The combination of low supplies and heightened physical demand may push gold prices to higher levels during latter half of the year. However, the prices are more likely to stabilize in 2016 and 2017.

HSBC maintained its 2015 average silver price forecast unchanged at $17.65 per Oz. However, the average price forecast for platinum was lowered to $1,337 from the previous forecast of $1,505. Also, average price forecast for palladium was lowered to $837 from $855.